BISK CPEasy WEEKLY TAX UPDATE
With E. Lynn Nichols, CPA
November 10, 2014
CONTENTS
1. IRS Proposes Guidance for Partners on Measuring Interest in Partnership
The IRS offers guidance to partners on how they should measure their interest in
a partnership's unrealized receivables and inventory items, adopting a
“hypothetical sales approach” to that measurement. In proposed rules ( REG151416-06, RIN 1545-BG21), the IRS also sets out guidance on the tax
consequences of a distribution that causes a reduction in that interest. The
government says the proposed rules take into account statutory changes since
the existing rules were issued under tax code Section 751(b) in 1956.
(11/3/2014)
2. Foreign Adjustment on Acquired CFC Applies to Pre-1987 Profits
In a legal memorandum, IRS Chief Counsel concluded that foreign tax
adjustments made on pre-acquisition years of a controlled foreign corporation
should be accounted for by adjusting the pre-1987 accumulated profits and
foreign income taxes of the CFC.
(CCA 201444039; 10/31/2014)
3. Passthroughs Account for Most Private Sector Jobs in 48 States
Forty-eight of the 50 states now have more than half their private sector
workforces employed by passthrough entities, according to research published
by the Tax Foundation.
(Article; State Tax Notes Today; 11/3/2014; Maria Koklanaris)
4. IRS Releases Publication on Farm Tax Returns
The IRS has released Publication 225 (rev. 2014), Farmer's Tax Guide, for use in
preparing 2014 returns, which explains how federal tax laws apply to farming and
serves as a guide to taxpayers for completing farm tax returns.
(Publication 225; 10/20/2014)
5. Estate Beneficiary Denied First-Time Home Buyer Tax Credit
A U.S. district court held that an individual who disclaimed her interest in property
from her grandmother's estate and then purchased a home that was a part of the
estate wasn't entitled to a first-time home buyer tax credit, finding that she did not
purchase the property within the meaning of section 36, but acquired it from a
related person.
(Estate of Kathryn L. Menges v. Steven T. Miller; DC M PA; No. 1:13-cv-01156;
11/4/2014)
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6. IRS Fact Sheet Details ACA Tax Provisions Affecting Individuals
The IRS has released a fact sheet on key tax provisions of the Affordable Care
Act that will affect federal individual income tax returns filed in 2015, providing
information on the premium tax credit, the individual shared responsibility
provision, and coverage exemptions.
(FS-2014-9; 11/5/2014 )
IRS Fact Sheet Describes ACA Tax Provisions Affecting Employers
The IRS has released a fact sheet on key tax provisions of the Affordable Care
Act that affect employers, with emphasis on provisions for determining workforce
size.
(FS-2014-10; 11/5/2014)
7. IRS Unlikely to Challenge Repair Regs Method Change Filings
The government is unlikely to challenge accounting method change applications
to comply with the final repair regulations filed by taxpayers who also file
incorrect section 481(a) adjustments unless the offense is egregious, IRS
officials said on November 5.
(Panel Discussion w/ IRS Executives; AICPA Fall Tax Conference; 11/5/2014
8. Second Circuit Affirms Corporation Received Dividends From CFC
The Second Circuit affirmed a Tax Court decision that applied the step
transaction doctrine to collapse a series of transactions to find that a corporation
received dividend payments from a controlled foreign corporation and was liable
for a substantial understatement penalty, finding that the corporation didn't
reasonably rely on Rev. Rul. 74-503 or an opinion from its CPAs.
(Barnes Group Inc. et al.; CA 2: No. 13-4298; 11/5/2014)
9. Couple Not Entitled to Deduct Losses from Rental Activities
The Tax Court, in a summary opinion sustaining an IRS determination limiting
real estate loss deductions, held that a couple's rental real estate activity was
passive under section 469 because they failed to establish the husband was a
real estate professional, precluding them from offsetting losses from that activity
against their other income.
(Howard C. Cantor et ux.; T.C. Summ. Op. 2014-103; 11/6/2014)
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